Types of Business Ownership

Who is your boss? Who is your boss’s boss? Can you become part owner? Forms of business ownership and type of business help describe how the business is organized and run.

4 Types of Ownership 1. Sole Proprietorship 2. Partnership 3. Corporation 4. Co-operative

1. Sole Proprietorship Owned by one person, who performs most roles and owns everything. Owner gets all profits, takes all the losses → called unlimited liability. Easiest and least expensive to set up. Easiest for tax purposes → income recorded under personal income.

1. Sole Proprietorship Advantages Owner makes all the decisions- hours of business, whom to hire. They are their own boss. Any profits belong to the owner.

1. Sole Proprietorship Disadvantages The owner may lack the ability to buy the right supplies, do accounting etc. It the business loses money, so does the owner. Creditors can claim the personal belongings of the owner. Long hours. If the owner is ill the business doesn't ’ t open.

2. Partnerships Two or more individuals share costs and responsibilities. Terms of partnership recorded in partnership agreement. “ Silent ” partners- partners that usually will front a lot of capital, but do not want to participate in business decisions – receive profits in return.

2. Partnerships Two types of Partnerships can exist in a business: General partnership All partners have unlimited liability (can be held responsible for the other partner’s business related debts.) Limited partnership Partners have limited liability (only responsible for their share.)

2. Partnership Advantages Two or more people share decision making process. One person may be better at one task than the other partner. Sometimes easier to borrow money if two people are involved.

2. Partnership disadvantages Share profits. Partners could disagree. Friendships can be lost over time as a result.

3. Corporation Business with a legal status. Can be as small as one person, or multinational. Some owned by individuals, families, small groups.

3. Corporation Ownership often broken into small units, shares, which are sold through a stock exchange. (ie. TSX) → a publicly traded corporation Those who buy: shareholders.

3. Corporations Since there are many owners, a board of directors runs corp. Shareholders have limited liability, not responsible for debts. Get profits as dividends.

3. Corporation  TYPES 1. Private Corporation Only a few people control stock. Not publicly traded. 2. Public Corporation Sell shares to raise money. 1 share = 1 vote; Those with most shares influence company decisions (usually orig. owner, execs.) 3. Crown Corporation Business owned by the federal or provincial government. Federal: VIA Rail, Canada Post, Bank of Canada. Provincial: BC Transit, BC Lottery, BC Hydro, BC Museum.

4. Cooperatives Business owned by workers/those who use it. Run by board of directors. Each member only gets 1 vote. Profits shared based on use. Examples: Peninsula Co-op, Mountain Equipment Coop (MEC.)

Franchise A franchisor licenses the rights to the business to a franchisee for a fee. Franchisee runs business according to agreement. Franchisee also pays monthly fee, has to purchase product through franchiser, sometimes gets trained by franchiser, has to maintain uniform quality etc. Examples: Tim Hortons, McDonalds, M&M Meats, Boston Pizza, UPS Store.